PayPal stock price has crawled back and jumped to its highest level since November 2022 as its turnaround strategy continued. It was trading at $89.3, up by over 78% from its lowest level in 2023, giving it a market cap of over $85 billion.
PayPal turnaround is continuing
PayPal, one of the best-known tech companies in the US, has been under pressure in the past few years as its growth trajectory faded.
Its main challenge is that the fintech sector has become highly crowded. Its eponymous wallet business is seeing strong competition from the likes of Google and Apple Pay.
At the same time, its unbranded business is seeing robust competition from companies like Affirm, Adyen, and Stripe.
PayPal is also having a hard time adapting to the new normal after its business saw strong growth during the pandemic. At the time, its business added millions of users, which pushed its annual revenue from $17 billion in 2019 to $21 billion in 2020.
There are hopes that PayPal’s turnaround under Alex Chriss is working. The most recent financial results showed that its transaction revenue rose by 6% in the third quarter, helped by Braintree and Venmo.
Total revenue rose to over $7.8 billion, while the transaction margin rose to $3.6 billion. PayPal has also become a highly profitable company, as its non-GAAP EPS rose by 22% to $1.2 in the last quarter.
The company expects its business to do well this quarter, with revenue growing in the low digits.
According to Yahoo Finance, the average revenue guidance for the fourth quarter is $8.27 billion, a 3% increase from the same period last year. Its annual revenue is expected to come in at $31.71 billion, a 6% increase from the last financial year.
The company is then expected to make over $33 billion in 2025, a 5.8% YoY increase. PayPal will likely do much better than this since it has a long track record of beating analysts estimates.
The case for the PYPL stock
There are a few reasons why PayPal stock price has more upside even as it continues to experience single-digit growth rate.
First, the company is fairly valued. It has a forward price-to-earnings ratio of 18.6, which is much lower than the forward S&P 500 multiple of 21. Its valuation metric is also lower than other fintech companies like Visa, Mastercard, and Block. It is also lower than the five-year average of 30.
Second, the company has millions of users, which it can monetize well. Its active accounts rose by 1% in the last quarter to 432 million. This is good progress since the company was shedding customers for several consecutive quarters.
Third, PayPal is still a strong brand that owns some of the best-known companies in the industry. It owns Braintree that handles billions of transactions each month, Venmo and PayPal’s main business.
Read more: PayPal stock price forecast: PYPL comeback could be epic
PayPal stock price forecast
PYPL chart by TradingView
The weekly chart shows that the PYPL share price formed an inverse head and shoulders pattern. It has now moved above the 100-week and 50-week moving averages, a sign that it is gaining attention.
The stock is also approaching the 23.6% Fibonacci Retracement level at $110, which is about 23% above the current level. Also, oscillators like the Relative Strength Index (RSI) and the MACD have continued rising.
Therefore, there are rising odds that the stock will continue rising as bulls target the 50% retracement point at $180, which is about 101% above the current level. A drop below the support at $71 will invalidate the bullish view.
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